Next month, South Korea is set to scale back its fuel tax reductions, resulting in an increase in the gasoline tax from 615 to 656 won per liter and the diesel tax from 369 to 407 won per liter. The announcement came from Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok on June 17. He stated that the temporary fuel tax cut, originally slated to end this month, will now be extended for an additional two months until the end of August, accompanied by a slight uptick in the fuel tax rate.
This adjustment means that consumers can expect higher prices for gasoline and diesel. The gasoline tax, initially at 820 won per liter, has seen gradual reductions since November 2021 due to increasing global oil prices. This extension marks the 10th time the tax cut has been prolonged. Currently, the gasoline tax reduction stands at 25% (205 won per liter), which will decrease to 20% (164 won per liter) in July. Meanwhile, the diesel tax cut will reduce from 37% to 30%.
This move to reduce tax cuts comes in the wake of recent decreases in oil prices and tax revenues. According to the Korea National Oil Corporation, the average gasoline price at gas stations nationwide on June 17 was 1,659 won per liter, reflecting a 27% decrease from the previous month. With gas stations expected to adjust their prices in response to the reduced tax cuts, the price per liter is anticipated to be 1,700 won starting July 1.
In response to the declining oil prices, the government has gradually reduced the gasoline tax cut from 37% at the end of 2022 to 25% last year and plans to further decrease it by an additional 5 percentage points. If the downward trend persists, the fuel tax reduction may come to an end within this year. Deputy Prime Minister Choi mentioned, “We will make a decision in August regarding whether to extend the measure, taking into consideration the global situation, including geopolitical risks in the Middle East, and the public’s burden regarding fuel costs.”